pan-european processing · was included in the swiftref bankers world online. this ensures that...

RepoRt on Activities 2013pRActitioneRs cReAting euRope-wide pAyment infRAstRuctuResmARch 2014

PAN-EuroPEAN

ProcEssiNg

3 / 42 ebA cleARing Report on Activities 2013 ebA cleARing2 / 42 ebA cleARing Report on Activities 2013

Cost-saving infra structure solutions for an integrated euro payments environment

ebA cleARing is a bank-owned provider of pan-european payment infrastructure solutions. established in 1998 by 52 banks, the company had 62 shareholders by march 2014. the mis-sion of EBA CLEARING is to offer efficient and cost-effective solutions in the co-operative space, which generate savings within its user banks.

ebA cleARing is the leading private sector provider of pan-european payment services in euro. it owns and operates euRo1, a large-value payment system with an Rtgs-equivalent net settlement arrangement, and step1, a single payment service for small and medium-sized banks, as well as step2, a pan-european Automated clearing house (pe-Ach) processing retail credit transfers and direct debits. by march 2014, over 250 banks across europe were directly connected to the services offered by ebA cleARing.

the company is also committed to delivering pan-european solutions in the e-payment area. mybank, an e-authorisation solution enabling internet shoppers across europe to pay via online or mobile banking, was launched on 25th march 2013. today, mybank is owned and managed by pRetA s.A.s., a fully owned subsidiary of ebA cleARing created in november 2013.

through regular user group meetings and infor-mation sessions, both at european and country level, ebA cleARing entertains a direct and intensive exchange with its user and stakeholder community. this user-centred approach has forged the company’s unique market responsive-ness as a co-operative and country-neutral undertaking in a fast-changing environment.

in co-operation with the euro banking Associa-tion, ebA cleARing plays an important role in the banking industry’s efforts to create, maintain and evolve an integrated pan-european pay-ments environment meeting the needs of the banks and their customers in the single euro payments Area (sepA).

ebA cleARingRepoRt on Activities 2013

ebA cleARing

overview 2013

euRo1 service

step1 service

step2 platform

step2 sct service

step2 sdd core service

step2 sdd b2b service

step2 ict service

step2 iet service

mybank solution

corporate activities

system performance, maintenance and enhancements

internal audit, information security and business continuity management

legal and compliance

Risk management

customer support

outlook 2014

board committees, user groups, steering groups and other expert fora

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the management

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For an in-depth introduc-tion to the EBA CLEARING Services, please consult our e-brochures on EURO1, STEP1 and STEP2:

https://www.ebaclearing.eu/E-books/EURO1-Servicehttps://www.ebaclearing.eu/E-books/STEP1-Servicehttps://www.ebaclearing.eu/E-books/STEP2-Services

5 / 42 ebA cleARing Report on Activities 2013 overview 20134 / 42 ebA cleARing Report on Activities 2013 overview 2013

functionality of the system made step2 the platform of first choice of many European communities in preparation of and during this migration. major new features, such as the sdd coR1 option, connectivity via ebics and an sct cycle with a sending cut-off at 16:00 cet were implemented in 2013 in order to facilitate the banks’ migration and satisfy their needs in sepA.

with the support of its technology partner siA, EBA CLEARING brought significant capacity upgrades and performance enhancements to the system in preparation of the sepA ramp-up phase. A third processing site for step2 was activated in January 2014 to ensure that the step2 resilience arrangements cover regional disasters. the company also orchestrated a major testing exercise for the large-volume users of STEP2 and fine-tuned its operational emer-gency procedures for the migration period follow-ing consultations with a dedicated working group.

based on these preparations, step2 was able to smoothly onboard both the very large volumes pre-advised by banks and additional traffic sent by communities that had not completed the build-up of their national infrastructure solutions in time. the step2 platform thus was instrumen-tal to banks in meeting the deadlines and legal requirements related to this challenging migration exercise.

Further reducing mandatory risk-taking in EURO1

euRo1 continued to provide a resilient and robust first choice, alongside TARGET2, for processing single payments. ebA cleARing kept pursuing its work geared at further reducing mandatory risk-taking in the system. A key deliverable in 2013 consisted in a change to the loss sharing arrange-ment, which was implemented in order to put more control back in the hands of the users and to encourage tighter risk management practices.

evolving the euRo1/step1 and step2 services as well as strengthening the company’s second and third lines of defence in accordance with existing and emerging regulatory requirements were other key items on the agenda in 2013.

Satisfying evolving user needs in the collaborative space

At the same time, ebA cleARing continued its efforts aimed at satisfying the evolving needs of its users in the collaborative space. the go-live of mybank on 25th march 2013 marked the start of a progressive roll-out of this pan-european e-authorisation solution to customers across the continent. by the end of 2013, pioneering banks from italy, france and luxembourg had activated mybank on approximately 10 million customer accounts and the first major e-billers and e-merchants had adopted the solution.

2013 was marked by the major changeover that the sepA migration end-date for euro retail payments of 1st february 2014 represented for payment service providers in the eurozone and their customers. sepA migration-related activities were also the top priority for ebA cleARing throughout 2013. the company continued to strengthen and enhance the STEP2 platform and intensified its customer support activities to assist its users across europe in ensuring a disruption-free changeover to the sepA instruments for their customers.

Helping the banks ensure a disruption-free SEPA changeover

SEPA migration affirmed the position of the step2 platform among the leading retail payment systems in europe. the timely delivery of its sepA services as well as the processing capacity, operational robustness and rich

oveRview 2013

7 / 42 ebA cleARing Report on Activities 2013 euRo1 service6 / 42 ebA cleARing Report on Activities 2013 euRo1 service

Further strengthening the participants’ risk management controls

A key deliverable consisted in a change to the loss sharing arrangement, which took place in June 2013 as part of the euRo1 reform program. until then, the calculation was only based on the bilateral limit allocations by the surviving banks for up to three failures; in case of four or more failing banks, the loss shares were calculated based on the total credit caps of the surviving banks. now, the loss sharing calculation is based on the bilateral limit allocations to the failing banks in the case of any bank failure situation, i.e. regardless of the number of failing banks. this single approach to the loss sharing calcula-tion puts more control back in the hands of the users and encourages tighter risk management practices as the amount of the loss share to be allocated will truly reflect the risk control measures applied by each participant towards the stricken banks.

in 2014, the company continued its efforts geared at further enhancing the risk reduction controls in euRo1. A proposal to further reduce the manda-tory limits was prepared for submission to the

shareholders meeting 2014. it consisted in a change of the mandatory limits to a formula where the sum of the mandatory limits granted to a participant in the system matches at all times the amount of one participant share in the liquidity pool of euRo1. this change, which was approved by the shareholders meeting 2014 and will be implemented in november 2014, will be covered in more detail in the Report on Activities 2014.

Optimising usability: enhanced EURO1/STEP1 Directory launched in October 2013

over the past year, ebA cleARing together with swift further enhanced the functionality and usability of the euRo1/step1 directory. the revamped euRo1/step1 directory was launched in october 2013 and can now be easily integrated into the banks’ infrastructure since it was included in the swiftRef bankers world online. this ensures that data from the euRo1/step1 directory can be received together with data from other directories managed by swift in one or more files according to the general for-mats and content requirements of the individual

euRo1 seRvice

A liquidity-saving net settlement system optimally supporting its users in their counterparty and risk management

in 2013 and early 2014, euRo1 continued to provide a resilient and robust first choice for processing single euro payments. during an ongoing period of major risk concerns and high liquidity costs, the euRo1 service has been optimally supporting its users in maximising their liquidity efficiency and minimising their ri sk exposure.

over the past year, ebA cleARing kept pursuing its work geared at further reducing mandatory risk-taking in the system and supporting the participants in optimising their liquidity management.

9 / 42 ebA cleARing Report on Activities 2013 euRo1 service8 / 42 ebA cleARing Report on Activities 2013 euRo1 service

banks and their back-office systems. At the same time, banks wishing to only receive information from the euRo1/step1 directory can continue to access the directory via the ebA cleARing website. Additional enhancements include the implementation of improved data maintenance and confirmation processes.

Outlook beyond 2014: more enhancements to come

many of the deliverables planned for the near to mid-term future are geared at helping users to further mitigate risks related to the processing and settlement of payments. these developments will ready euRo1 for compliance with the new cpss-iosco principles for financial market infrastructures (pfmis) that are expected to be implemented in 2015.

together with the operations and technical committee (otc), preparations are also ongoing for the changeover of euRo1 from mt message formats to the iso 20022 Xml standard in novem-ber 2017. the migration will follow a “like-for-like” approach, which will only have a minimal impact

on the participants in terms of implementation requirements and costs. this approach further ensures the highest level of stability for the processes at the level of the euRo1 system and of the banks. it is planned that the platform will migrate to iso 20022 Xml in parallel with tARget2, which will enable all euRo1 partici-pants to seamlessly continue benefiting from the cost-effective and resilient infrastructure as well as from the liquidity-efficient functionality of the system.

in parallel to following this minimal mX migration implementation scenario, the company plans to start a work stream under the guidance of the strategy and policy committee geared at evolv-ing euRo1 into a highly agile payment platform ready to adapt to emerging payment infrastruc-ture requirements in a fast-changing environment. the company will also review the euRo1 admis-sion and participation criteria to ensure that they continue to be adequate.

Key fActs And figuRes(status: march 2014)

functionRtgs-equivalent large-value payment system on a multilateral net basis, for single euro transactions of high priority and urgency, and primarily of large amount

live dAte4th January 1999

technicAl opeRAtoRswift

AveRAge dAily volume220,437 transactions

AveRAge dAily vAlueeuR 184.3 billion

legAl bAsis• Single Obligation Structure (SOS) recog-

nised and enforceable in every eu jurisdic-tion and oecd jurisdictions outside the eu where participants have their registered Head Offices

• Fully compliant with the 10 Core principles for systemically important payment systems (sips)

• Overseen by the European Central Bank (ecb)

pARticipAtion62 participants / 47 sub-participants

ReAchmore than 8,000 participant bics and over 18,000 additional bics reachable via euRo1/step1 participants as listed in the euRo1/step1 directory

settlement of single obligAtion At the end of the dAyin tARget2 via the Ancillary system inter-face (Asi4)

speciAl fActs oR feAtuRes in 2013/2014• Implementation of one single approach

to euRo1 loss sharing calculation as part of euRo1 reform program to give more control to the participants

• Launch of enhanced EURO1/STEP1 directory in June 2013

euRo1: AveRAge dAily volume of pAyments pRocessed

2014

200,000

250,000

300,000

150,000

2011 2012 2013100,000

11 / 42 ebA cleARing Report on Activities 2013 step1 service10 / 42 ebA cleARing Report on Activities 2013 step1 service

functionpayment service for single euro payments of high priority and urgency, complementary to euRo1 and pre dominantly geared towards small and medium-sized banks

live dAte21st november 2000

technicAl opeRAtoRswift



legAl bAsisSTEP1 benefits from the solid legal frame-work underpinning of euRo1

pARticipAtion79 participants / 23 sub-participants

ReAchmore than 8,000 bics directly addressable and over 18,000 bics reachable via euRo1/step1 participants as listed in the euRo1/step1 directory

settlementA step1 participant settles with a euRo1 bank of its choice but directly exchanges payments with all euRo1/step1 participants

participation in step1(as of march 2014)

step1 seRvice

A turn-key solution for single euro processing

the step1 service offers a direct and cost- effective “plug and play” access to a highly resilient single euro payment processing infra-structure. thanks to its low joining and running costs as well as its wide reach across and beyond europe, step1 provides considerable value to smaller and medium-sized banks.

These benefits also make STEP1 an appealing offering for larger-sized banks whose head Office is not located in an EU or OECD country and that look for an efficient and cost-saving way to feed their one-leg-out euro transactions into the european market. because of the domiciliation of their Head Office, these banks do not fulfil the admission criteria for EURO1. over the past few years, step1 has attracted several eu branches of non-european banks and this trend will continue in 2014.

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step1 participants

step1 sub-participants


13 / 42 ebA cleARing Report on Activities 2013 step2 platform12 / 42 ebA cleARing Report on Activities 2013 step2 platform

The strategic choice for SEPA migration

step2 played a crucial role in the strategic planning of many communities and banks across europe in the run-up to the sepA migration end-date for the eurozone on 1st february 2014. Accordingly, in 2013 ebA cleARing put a key focus on readying the platform for the last phase of this major changeover exercise.

the activation of a third processing centre for the step2 sepA services in January 2014 has placed step2 among the leading payment infrastructure systems in europe in terms of operational and technical resilience, reflecting the platform’s growing systemic importance. with the support of its technology provider siA, ebA cleARing upgraded the performance of the system in the course of 2013 to prepare the platform for coping with the expected increase in sepA volumes.

step2 plAtfoRm

A highly robust platform with best-of-breed functionality

functionality-wise, step2 witnessed several improvements in 2013:

• The first two banks started exchanging files in the batch processing mode in october 2013. Batch processing is a highly efficient process-ing mode where banks exchange batches of files that are pre-sorted by receiving bank and require less validation.

• EBICS was introduced in November 2013 as a third network option for sending and receiving payment transactions to and from step2.

• EBA CLEARING also put in place optional services requested by one or more communities, such as the sdd core d-1 scheme option or the mandate alignment service sedA, which enables italian banks to exchange mandate- related information. the company will continue to explore possibilities with its users geared at evolving any services pioneered in one com-munity into pan-european offerings.

Extensive coordination with users and providers to ensure SEPA readiness

in order to establish the necessary sepA readiness at the level of all parties involved, ebA cleARing extensively coordinated its step2-related activities with its service users and providers and closely monitored the migration progress:

• With the support of STEP2 Participants, the company worked on identifying sepA migration- related operational contingency scenarios and implemented measures aimed at mitigating the impact of such scenarios on the good function-ing of step2.

• The Large Volume Exchange Program continued with major testing exercises, such as peak day simulation testing, and the introduction of a volume alert system to anticipate migration peaks.

• The Company further intensified the direct ex-change with its users on migration-related topics through the introduction of weekly calls with critical and highly active users in november 2013, regular step2 sepA business working group meetings and user group meetings at country level as well as through a closer monitor-ing of migration activities on a by-country basis.

Continued evolution of the STEP2 system

over the past year, ebA cleARing has also further pursued the project of enhancing the certainty of the settlement of the step2 sepA services. A first set of measures geared at improving the pro- vision of settlement information to participants and thus increasing predictability of liquidity needs is scheduled for implementation in november 2014.

in response to user requests for an iso 20022- compliant card clearing service, the company has started to develop a step2 service that will clear transactions originated by card payments.

these and other projects geared at evolving the platform in line with user needs and regulatory requirements will be taken forward throughout and beyond 2014.



functionpan-european Automated clearing house (pe-Ach) platform for processing euro retail payments

lAunch28th April 2003

technicAl opeRAtoRsiA

AveRAge dAily volume34,825,863 transactions

AveRAge dAily vAlueeuR 41.5 billion legAl bAsisstep2 is overseen by the european central bank and fully complies with• the six CPSS Core Principles applying

to prominently important Retail payment systems (piRps)

• the four criteria for SEPA-compliant infra-structures defined by the ECB

speciAl fActs oR feAtuRes in 2013/2014• Disruption-free onboarding of large domes-

tic volumes in the run-up to the sepA migration end-date: the overall step2 traffic grew by close to 550 percent from march 2013 to march 2014, from 5.4m to 34.8m transactions processed on average per day

• The processing capacity, resilience arrangements and functionality of the platform and its services were further upgraded during this period

step2 evolution in 2013/2014

daily average volumesand key enhancements

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0 m

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2014

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end-to-end high volume test

ebics activation

step2 feb 2014 release live

3rd pole contractually live

implementation of sdd batch processing

sdd performance enhancements

sct performance enhancements sct

16:00 cut-off live

sdd coR1 option activation

batch processing activation


step2 sct seRviceKey fActs And figuRes (status: march 2014)

functionAch service processing sepA credit trans-fers and providing full pan-european reach

live dAte28th January 2008



legAl bAsiscompliant with the sepA credit transfer scheme Rulebook and implementation guidelines of the european payments council (epc)

pARticipAtion127 direct participants

ReAchmore than 4,600 reachable banks, of which 70 percent are reachable via direct partici-pants and the other 30 percent via links established with 14 other sepA csms

settlementpositions provided by multilateral netting module (mnm) are settled in tARget2 via the Ancillary system interface (Asi)

speciAl fActs oR feAtuRes in 2013/2014• In February 2014, the daily average vol-

umes in step2 sct reached an all-time record with 15,006,802 processed transactions

• STEP2 SCT witnessed a new peak day on 2nd march 2014, surpassing the 25 million mark for the first time

• A new STEP2 SCT settlement cycle with a sending cut-off at 16:00 cet and settle-ment before 17:00 cet was introduced in september 2013

A key pipeline for domestic and cross-border SEPA transactions

the step2 sepA credit transfer (sct) service witnessed a steep volume evolution in 2013, moving from an average of 3.1 million transac-tions processed per day in december 2012 to a daily average of almost 10 million transactions in december 2013. by march 2014, the service handled on average close to 15 million credit transfers per day.

by the end of 2013, approximately 85 percent of the traffic in STEP2 SCT was composed of domestic transactions, mostly coming from germany, finland, italy, france, the netherlands and luxembourg. several communities, including the estonian banks, migrated all their euro retail payments to step2 as part of the sepA changeover.

step2 sct continued to provide full reachability to financial institutions across SEPA with 127 direct participants connected to the platform and more than 4,600 reachable bics registered in the routing table of the service.

Gradual pick-up of batch processing functionality

ebA cleARing continued to bring enhance-ments to the sct service in 2013 in line with its release schedule. these included, among others, features geared at helping the banks to optimise their handling of payment file cancellations in the batch processing mode.

Following the first exchange of SCT batches between two german banks in late october 2013, large volume users in step2 started to succes-sively activate the batch processing functionality for their bilateral exchange of high volumes of both sct and sdd transactions via step2.

Introduction of a new SCT cycle with a 16:00 CET sending cut-off

in line with user requests and following extensive user consultation, the company implemented an additional sct cycle on the step2 platform on 30th september 2013. the sending cut-off for this last sct settlement cycle in the day stands at 16:00 cet and thus allows banks to submit credit transfers for same-day settlement up to two hours later than they were previously able to do. the necessary procedures were put in place to ensure that the settlement of this cycle takes place before 17:00 cet.

with the new cycle in place, step2 sct users have at their disposal four intra-day, one over-night and two optional night-time settlement cycles. in an open dialogue with its users, ebA cleARing will continue to assess existing and emerging user requirements in this area with a view to evolving its settlement cycle arrangements in response to these needs and expectations.


step2 sdd coRe seRviceKey fActs And figuRes(status: march 2014)

functionAch service processing sepA core direct debits and providing full pan-european reach

live dAte2nd november 2009



legAl bAsiscompliant with the sepA core direct debit scheme Rulebook and implementation guide-lines of the european payments council (epc)


ReAchover 3,900 reachable banks, of which 70 percent are reachable via direct participants and the other 30 percent via links estab-lished with 13 other sepA csms

settlementpositions provided by multilateral netting module (mnm) are settled in tARget2 via Ancillary system interface (Asi)

speciAl fActs oR feAtuRes in 2013/2014• In February 2014, the daily average vol-

umes in step2 sdd core reached an all-time record with over 15 million pro-cessed trans actions

• STEP2 SDD Core witnessed a new peak day on 4th march 2014 surpassing the 85 million mark

• The SDD Core D-1 Scheme option was activated for about 2,600 bics in the step2 sdd core routing table on 4th november 2013

step2 sdd b2b seRviceKey fActs And figuRes(status: march 2014)

functionAch service processing sepA business-to- business (b2b) direct debits and reaching every financial institution in Europe that offers this payment instrument to its customers

live dAte2nd november 2009



legAl bAsiscompliant with the sepA b2b direct debit scheme Rulebook and implementation guidelines of the european payments council (epc)


ReAchover 3,300 reachable banks, of which 70 percent are reachable via direct partici-pants and the other 30 percent via links established with 13 other sepA csms

settlementpositions provided by multilateral netting module (mnm) are settled in tARget2 via Ancillary system interface (Asi)

Big bang activation of SDD COR1 Scheme Option for 2,600 BICs

on 4th november 2013, ebA cleARing activat-ed the sdd core d-1 (sdd coR1) scheme option for about 2,600 bics in the step2 sdd core routing table. this scheme option had been available on the platform since 2012 and allows creditor banks to send any sdd collections up until d-1 within a closed user group arrangement.

ebA cleARing’s mass provisioning exercise in november 2013 put in place full sdd coR1 reach for bics in Austria and germany; by march 2014, complete coverage had also been achieved for the spanish community.

A steep volume ramp-up for Europe’s leading SDD clearing service

the step2 sepA core direct debit (sdd core) service onboarded substantial volumes of domestic direct debits from summer 2013 to february 2014. Daily average traffic grew from 840,242 transactions in August 2013 to over 15 million transactions in the month following the sepA migration end-date. A new record peak was reached on 4th march 2014 with more than 85 million transactions processed.

This traffic rise was mainly a result of banks from germany, the netherlands, belgium, france and italy channelling domestic direct debits through step2. thanks to ebA cleARing’s extensive sepA migration-related preparations with both its users and providers, the step2 platform was able to smoothly absorb both the very large sdd

Postponement of SDD sending cut-offs and decoupling from settlement processes

based on the 2013 user consultation and further discussions among the users, ebA cleARing decided in early 2014 to decouple the sdd sending cut-off for future direct debits from the settlement of transactions being settled on that day. At the same time, these sending cut-offs will be moved to later points in the day for both the step2 sdd core and b2b services. in detail, the sdd b2b sending cut-off will be moved from 12:00 to 15:00 cet and the sdd core sending cut-off from 11:00 to 16:00 cet.

with this change, which will be implemented in november 2014, the step2 users are taking an additional step towards aligning cut-off times for sepA services across different communities. the company will evaluate further changes in more detail with the community of users in the course of 2014.

volumes pre-advised by banks and additional traffic sent by communities that had not complet-ed the build-up of their national infrastructure solutions in time.

step2 sdd core continued to provide full reachability to financial institutions across SEPA with 93 direct participants connected to the platform and more than 3,900 reachable bics registered in the routing table of the service.

the daily average volumes processed in the step2 sdd business-to-business (b2b) service started to grow in the last quarter of 2013, pass-ing from a daily average of 23,652 transactions in october 2013 to 71,028 in december 2013. A new peak was reached on 3rd february 2014 with 307,695 transactions settled. Altogether, over 3,300 bics were registered in the step2 sdd b2b Routing tables by march 2014.


step2 ict seRvice Key fActs And figuRes(status: march 2014)

functioneuro retail payment service for italian domestic credit transfers designed to facilitate the progressive migration of these payment flows to SEPA

live dAte24th november 2006


pARticipAtion6 direct participants / 63 indirect participants

settlementin the euRo1/step1 system

pRogRessive migRAtion fRom step2 ict to sct in 2013 And eARly 2014

volumes in the step2 italian credit transfer (ict) service progressively decreased through-out the second half of 2013 and early 2014, due to the migration of these transactions to step2 sct.

By March 2014, the overall traffic in the service had decreased by 91 percent compared to march 2013. the service is expected to close down in the second half of 2014.

step2 iet seRvice Key fActs And figuRes(status: march 2014)

functioneuro retail payment service ensuring the settlement of irish domestic credit transfers and direct debits. step2 iet was designed to facilitate the progressive migration of these legacy payments to sepA.

live dAte10th october 2011



settlementpositions provided by multilateral netting module are settled in tARget2 via Ancillary system interface (Asi)

Providing a stepping stone to SEPA

over the past year, the step2 irish transfer (iet) service continued to ensure the daily settlement of legacy irish credit transfers and direct debits between the six direct participants in the service.

in the period under report, daily average volumes decreased from an average of over 700,000 transactions per day to 40,598 transactions per day in March 2014, reflecting the ongoing migra-tion of the irish payment volumes to the step2 sepA services. the step2 irish transfer service is foreseen to close down on 31st July 2014.

23 / 42 ebA cleARing Report on Activities 2013 mybank solution22 / 42 ebA cleARing Report on Activities 2013 mybank solution

mybAnK solution

Launch of the MyBank SCT application in March 2013

mybank was launched in march 2013 with 10 banking groups, representing a total of 28 individual participating institutions. mybank went live in three countries with a solution supporting the initiation of sepA credit trans-fers for online purchasing transactions. in a first phase, MyBank focused on onboarding banks, which resulted in the solution being offered by over 140 financial institutions by the second quarter of 2014.

within less than twelve months after the launch, mybank became available to twelve million retail customer accounts, building reach in italy in particular.

Growing support for MyBank amongst e-merchants

by early 2014, merchant acquisition had taken off on a larger scale, with the italian community taking the lead in this area as well. the list of major italian corporates and online businesses offering mybank includes enel energia, italy’s key energy provider, tirrenia cin, the leading shipping company connecting the mainland with the italian islands and Alpitour world, a major tourism company, as well as online insurer Zurich connect. feedback from the merchants that have rolled out the solution has been positive, both in terms of the effort and investment in-volved in the implementation as well as in terms of customer response to this new payment option.

A service provider program was launched in 2013 for companies supporting financial institu-tions and/or merchants in connecting to mybank. by march 2014, 12 providers had completed the self-certification process that is part of this program.

in december 2013, ebA cleARing launched an enhanced version of the mybank sct application, which facilitated the usage of mobile applications to initiate and authorise mybank transactions on mobile devices.

25 / 42 ebA cleARing Report on Activities 2013 mybank solution24 / 42 ebA cleARing Report on Activities 2013 mybank solution

Transferring the MyBank activities to a dedicated corporate vehicle

throughout the second half of 2013, ebA cleARing explored various options for pro-viding the mybank initiative with an appropriate corporate vehicle in order to allow the initiative to evolve, innovate and grow in the new e-author-isation, e-payment and e-commerce space. to that effect, the company created on 14th novem-ber 2013 a fully owned subsidiary under french law, named pRetA s.A.s., which took over the mybank assets and activities in march 2014.

MyBank Mandates expected to be live in October 2014

A mybank mandate pilot was launched in october 2013 with participants from six countries. A MyBank solution supporting the creation, modifi- cation and cancellation of sepA core direct debits is scheduled to go live on 27th october 2014.

Another mandate solution to be launched on the same date will support mandates by consumers waiving their automatic “no-questions-asked” refund right. this will help bridge the gap between today’s situation, where no-refund direct debits still exist as niche products in several countries, and the introduction of a pan-european scheme foreseen in the coming years. mybank mandates do not interfere with the statutory refund rights provided under consumer law.

it is planned to include sepA b2b direct debit mandates in the mybank mandate portfolio.

Outlook 2014: expanding the MyBank portfolio

As a pan-european e-authorisation solution, mybank continues to support the growth of e-commerce in europe by offering a simple and secure way of buying online and paying through the sepA instruments.

both the existing and any new mybank function-ality will be covered by regular risk assessments to adapt the mybank security model to techno-logical evolution, regulatory requirements and user expectations.

preparations are under way at the level of the financial institutions supporting MyBank to further step up their onboarding activities with regard to e-merchants, corporate customers and public administrations. it is also expected that mybank will become available in more european coun-tries in 2014 and 2015.

furthermore, a major focus in 2014 will be put on considering the impact of the new payment services directive (psd2) and the access-to- account requirements it stipulates on the posi-tioning of mybank. since mybank provides a highly secure interface for accessing payment accounts, it could be positioned as a solution responding to the requirement for banks to give third party providers access to payment accounts. MyBank also holds a significant potential in the area of e-identity services, which will be further explored in 2014 and beyond.

The MyBank four-corner model the electronic authorisation and the transfer of payments are handled through the seller and buyer banks.

Paying online through your own bankonce you have clicked the mybank button and selected your bank, you are automatically directed to your own online banking portal.

27 / 42 ebA cleARing Report on Activities 2013 corporate Activities26 / 42 ebA cleARing Report on Activities 2013 corporate Activities

the systems, applications and networks man-aged and operated by ebA cleARing per-formed according to the agreed service levels and in line with the highest resilience and security standards during the period under report.

based on an extensive testing and system upgrade exercise in co-operation with the users of the step2 sepA services and ebA cleARing’s technology provider siA, the processing of growing sepA volumes took place in a smooth and reliable manner, without any delays or disruptions.

system peRfoRmAnce, mAintenAnce And enhAncements

STEP2 capacity upgrades for peak days with 100+ million transactions

In the first half of 2013, the processing speed and capacity of the step2 platform were further upgraded to enable the handling of up to 500 million sepA credit transfers and sepA direct debits within a day. this readied the platform for the processing of peak days of over 100 million transactions, which the system started seeing in march 2014.

ebA cleARing also introduced a batch process-ing mode for sepA direct debits and enhanced validation and reporting functionality around the existing sepA credit transfer batch processing mode in the course of 2013. by processing messages that are pre-sorted by receiver and matching the R-transactions it receives, the step2 batch processing mode combines key advantages of both bilateral file exchange and the use of a central clearing platform. from the last quarter of 2013 on, step2 started to witness a significant increase in batch processing volumes.

inteRnAl Audit, infoRmAtion secuRity And business continuity mAnAgement

the ebA cleARing resilience levels and business continuity arrangements are tested, revised and enhanced at regular intervals. the company performs its daily tasks in parallel for all systems from two of its operating centres. machine and staff rotation were conducted throughout the period under report in order to keep the staff familiar with the different operation centres.

Enhanced STEP2 resilience covering regional disasters

by activating a third processing site for the step2 sepA services in January 2014, ebA cleARing further strengthened the resilience of the platform in the light of its growing strategic significance to communities across Europe. By putting in place a third pole for the step2 sys-tem architecture that is located at a sufficient distance from its first and second processing sites, the company has ensured that its system operations cannot be directly affected by the same regional disaster. As part of these enhanced business continuity arrangements, the company also opened a third centre for its operations

department in frankfurt, germany, in addition to its existing centres in brussels and paris.

in preparation of the sepA migration end-date, ebA cleARing undertook a review of the step2 operational procedures with the support of its users in order to prepare for exceptional circumstances. As a result, temporary changes were brought to the step2 operational emergen-cy procedures to grant ebA cleARing as system operator the necessary authority to address SEPA migration specific disruptions that might occur during the run up to the sepA migration end-date.

throughout 2013 and early 2014, the business continuity procedures of ebA cleARing were tested in a number of internal and external exercises. A step2 crisis simulation exercise that took place in late 2013 with the support of SIA and five volunteering user banks involved for the first time the third pole. The Company’s business continuity management system (bcms), which had been compliant with bs25999, was aligned with the international standard iso 22301 in the course of the year.

29 / 42 ebA cleARing Report on Activities 2013 corporate Activities28 / 42 ebA cleARing Report on Activities 2013 corporate Activities

legAl And compliAnce

the upcoming implementation of the cpss-iosco principles for financial market infra-structures (pfmis) was a key focus of the company in 2013 and continuing in 2014.

euRo1 and step2 were fully compliant with the oversight requirements based on the core principles for systemically important payment systems (sips). Achieving compliance with the pfmis is therefore approached starting from a gap analysis, which was conducted during 2013 against the pfmis and the draft ecb Regulation on oversight requirements for sips.

the evolvement of step2 from a prominently important Retail payment system (piRps) to a SIPS will be of particular significance in this

ongoing exercise. in the context of this exercise, the company will also address governance matters, general business risk and recovery and orderly wind down planning as well as other areas impacted by the new requirements for fmis.

the compliance function within the company is being enriched with a specific group control and compliance framework, given in particular that ebA cleARing has created pRetA s.A.s. as a fully owned subsidiary into which the mybank activities have been transferred. in addition, an annual compliance program is being developed for the specific purpose of compliance with the oversight requirements for sips as a result from the ecb Regulation implementing the pfmis for payment systems.

The function of Chief Risk Officer was created in January 2013 in order to further strengthen the company’s organisational processes for risk management. the Risk management function was charged with the centralisation and imple-mentation of a Risk management framework (Rmf) which had been developed in 2012. one of its key objectives is the promotion of strong

risk awareness and risk practices overall and in particular those that are most applicable to the company, namely reputational and operational risk.

the Risk management function assures that risk tools and methodologies are developed and properly maintained, in line with best industry practice and any requirements stemming from the regulatory framework.

Establishing an Internal Audit function

the internal Audit function was created in January 2013 in order to further strengthen thecompany’s organisational processes and remain in line with the requirements of the new cpss-iosco principles for financial market infrastruc-tures (pfmis).

in the period under report, a formal audit struc-ture in line with best industry practice was embed- ded within the company. internal Audit was positioned as being the ‘third line of defence’, key to maintaining the company’s internal robustness.

ISO 27001 certification confirmed for 2014

the information security management system of ebA cleARing maintained its iso 27001 certification for 2014 following a first formal ISO surveillance audit conducted in late 2013.

As in previous years, ebA cleARing continued to foster strong ties with its shareholder and user community. Responding to and satisfy-ing customer needs stood at the core of all the company’s activities. this user-centred focus shaped ebA cleARing’s approach to day-to-day issue-solving just as much as it marked the company’s strategic considerations.

the investigations and customer support unit (icu), which provides the users of the ebA cleARing services with a single point of contact for their queries, handled on average 141 cases per month in 2013.

45+ country group meetings and 70+ bilateral meetings in 2013/2014

user consultation and information are top priori-ties for ebA cleARing, which translated into a great number of meetings held at regional, national and bilateral level as well as at the level of the different service communities.

besides organising regular committee, user advisory group and working group meetings, ebA cleARing representatives participated in over 45 country group meetings held in 15 different countries in 2013 and early 2014.

five information sessions on mybank and one on the step2 sepA services took place during the period under report as well as more than 70 bilateral meetings with existing and potential users. in addition, roadshows were held in the nordic and baltic countries and croatia. ebA cleARing speakers contributed to around 40 conferences as well as other industry events.

customeR suppoRt

RisK mAnAgement

31 / 42 ebA cleARing Report on Activities 2013 outlook 201430 / 42 ebA cleARing Report on Activities 2013 outlook 2014

The delivery of efficient and highly reliable interbank payment services on a daily basis will remain the key aim of ebA cleARing as the integration and consolidation of the european payments markets continues. Accordingly, many of the deliverables planned for euRo1 and step2 for 2014 are geared at helping users to further mitigate risks related to the processing and settlement of payments handled by these services. these and other developments will also be taken forward in order to ready the ebA cleARing services for compliance with the new regulatory requirements that took shape in 2013 and are expected to be implemented in 2014.

Regarding euRo1, preparations are also ongoing for the changeover of the system from mt to mX in 2017. in accordance with industry expecta-tions, the platform will migrate to iso 20022 Xml in parallel with tARget2, which will enable its users to seamlessly continue benefitting from the cost-effective and robust infrastructure as well as from the liquidity-efficient functionality of EURO1.

Taking SEPA as a starting point for new developments

while preparing to meet short- and mid-term regulatory and industry requirements, ebA cleARing will at the same time look at the expectations and future requirements of its users and their customers in the single euro payments Area. sepA is a starting point for designing payment services that serve bank customers in better or new ways, based on uniform standards that do not require constant adjustments at the level of both banks and their customers.

the mybank solution, in particular, can provide the basis for the development of a wider range of payment services in the collaborative space. mybank holds a great potential in the area of e-mandate creation and handling and in the area of e-identity services. the central mission of ebA cleARing’s fully owned subsidiary pRetA will

outlooK 2014

consist in shaping mybank into an instrument that will help the payments industry respond to upcoming requirements, such as in the area of account access foreseen in the new payment services directive (psd2).

Reviewing the Company’s governance arrangements

in the light of these opportunities, a major focus of ebA cleARing for the upcoming year and beyond will be placed on taking the necessary steps to further strengthen the strategic position-ing of the company’s services and to develop its service portfolio. in this context, ebA cleARing will continue its open dialogue with the euro banking Association and feed the results of the Association’s research and assessments into the company’s service development projects.

the evolving activities of the company and the relevance of its sepA services have brought again to the fore the question regarding the need to evolve the governance arrangements of the company. with the migration of major volumes to the step2 sepA services nearly completed and service usage patterns becoming more stable, the time has come to revisit this matter in an open dialogue with the company’s shareholders and service users.

33 / 42 ebA cleARing Report on Activities 2013 governance and user groups32 / 42 ebA cleARing Report on Activities 2013 governance and user groups

boARd committees, useR gRoups, steeRing gRoups And otheR eXpeRt foRA

Board Committees

The Audit & Finance Committee (AFC) has the mission of setting out the policy and the guidelines for the internal and external audit of the Company and its activities, and to define and monitor the internal audit requirements as well as the tasks entrusted to external auditors. the Afc is further in charge of reviewing and monitoring the financial situation of the Company. the Afc is composed of board members only.

The Board Risk Committee (BRC) has the purpose of assisting the board of directors in fulfilling its oversight responsibilities with regard to the risk tolerance of the company and the risk management and compliance framework. the bRc is composed of board members only.

The Legal Advisory Group’s (LAG) mission is to analyse and review proposals from a legal point of view and to formulate recommendations regarding the same. the lAg also assists in the monitoring of legal projects and formulates recommendations regarding the resourcing for such projects. the members of the lAg are in-house lawyers at banks that are members of the euro banking Association and/or share-holders of ebA cleARing.

The Operations & Technical Committee’s (OTC) focus is to recommend enhancements to the operational, procedural, functional and technical aspects with regard to the ebA cleARing services euRo1, step1 and (where relevant) step2. its major task is to examine and propose operational and technical enhancements to the infrastructure of the company. the otc is composed of business and technical experts from shareholder banks appointed by the different national user communities.

The Strategy & Policy Committee (SPC) focuses on addressing the longer-term position-ing and development of ebA cleARing. through its monitoring of the payments industry, it aims to identify and assess the banks’ needs in order to propose and evaluate the development of new products and services. the spc is composed of board members only.

34 / 42 ebA cleARing Report on Activities 2013 governance and user groups 35 / 42 ebA cleARing Report on Activities 2013 governance and user groups

User groups

The STEP1 User Advisory Group (STEP1 UAG) serves as a decision-making platform within the step1 user community and as a channel to express requirements or proposals towards the board of the company and its committees. the step1 uAg is composed of representatives from each country or grouping of users.

The STEP2 SEPA Business Working Group (SEPA BWG) serves as a forum in which direct participants in the step2 sepA services can dis- cuss and provide feedback on issues and devel-opments concerning these services. the sepA bwg is formed by bank representatives of the different national communities in sepA. this interim user forum will give way to more formally defined user governance arrangements once sepA migration has led to more stable usage patterns in the step2 sepA services.

Steering Groups and other expert fora

The Future Development Group’s (FDG) mission is to carry out a review to ensure that the euRo1 setup continues to meet the users’ needs in terms of liquidity efficiency, risk control and the loss sharing arrangements. the fdg acts as an advisory group to the company’s board and management. it is composed of representatives from the treasury and operations departments of euRo1 participants that wish to make more use of the service.

The Risk Managers’ Forum (RMF) is geared at fostering a risk dialogue between ebA cleARing and its service users. the Rmf focuses on risk issues related to clearing and settlement – in particular credit risk, liquidity risk, operational risk – both from a system design and a processing point of view. it also looks into the implications of regulatory risk management requirements. the Rmf is composed of Risk managers from the user banks with expertise and current responsi-bilities for assessing risks related to the banks’ usage of financial market infrastructures, or related credit and liquidity risks.

The Steering Group on SEPA Large Volume Exchange (SEPA LVE SG) is geared at facilitat-ing the migration of large domestic retail volumes to ebA cleARing’s sepA infrastructure. the sepA lve sg offers a coordination platform aimed at helping all involved parties to ensure that end-to-end processing of these volumes will take place in a reliable and stable manner. the group is composed of representatives of banks that are direct participants in one or several step2 sepA services and wish to prepare for the exchange via step2 of large domestic sepA volumes on the sending and/or receiving end.

The Treasury and Liquidity Group (TLG) acts as an advisory group of experts to the board and management on issues relating to the use of liquidity within euRo1. the tlg is composed of representatives from the treasury departments of euRo1 participants.

The Operational Procedures Working Group’s (OPWG) aim was to identify sepA migration- related operational contingency scenarios and to recommend measures aimed at mitigating the impact of such scenarios on the good functioning of the step2 sepA services. ebA cleARing conducted a review of the step2 operational procedures with the support of this group and brought temporary changes to the step2 operational emergency procedures in the last quarter of 2013.

the opwg started its work in september 2013 and consisted of representatives from step2 direct participants and the results of the discus-sions were presented to both the otc and the step2 sepA bwg. the group was dissolved on 1st february 2014.

The STEP2 SEPA Migration Forum’s mission is to exchange any information on practical and operational issues experienced during the sepA migration process. the forum was kicked off in november 2013 and is composed of representa-tives from the most active and critical step2 users. it is expected that this group will be dis-solved after the sepA migration transition period ending on 1st August 2014.

37 / 42 ebA cleARing Report on Activities 2013 the board36 / 42 ebA cleARing Report on Activities 2013 the board

the boARd

DEPUTy CHAIRMANROBERT HEISTERBORGing bank

CHAIRMANGIORGIO FERREROintesa sanpaolo

CHAIRMANERkkI POUTIAINENnordea bank finland(as of 23rd may 2013)

THOMAS EGNERcommerzbank

JOSé LUIS FERNáNDEz IGLESIASbanco bilbao vizcaya Argentaria

LUIS PEDRO SIMõES banco espirito santo

MARIE CHEVAL société générale

EMMANUEL DE BOUARDsociété générale (as of 23rd may 2013)

PAOLO zANCHIbanca monte dei paschi di siena

DANIELA DELL'ARCIPRETEintesa sanpaolo(as of 13th June 2013)

IVO DE MEERSMAN Kbc bank

kIRSTINE NILSSONswedbank

PAUL NIxON hsbc

CHRISTIAN WESTERHAUSdeutsche bank

NARINDA yOU crédit Agricole

PETER VANCEAllied irish banks

HAyS LITTLEJOHNubs

OLLI käHköNENnordea bank finland

FABIO STRAGIOTTOunicredit(as of 13th June 2013)

39 / 42 ebA cleARing Report on Activities 2013 the management38 / 42 ebA cleARing Report on Activities 2013 the management

CHIEF ExECUTIVE OFFICERGILBERT LICHTER

USER ADMINISTRATION & CORPORATE SECRETARIATERIC CHARLES

ROGER T. STORMbank Relations and marketing

OFFICES ADMINISTRATION & MANAGEMENTDANIEL SzMUkLER

BRITTA kOTTHAUSsenior Advisor

CHRISTINE ROULINsenior manager

JETTE SIMSONmaintenance and procurement

ALAN TAyLORdirector(until 31st march 2014)

JOHN BROxISdirector(until 31st January 2014)

kATJA HEyDERmarketing

ERWIN kULknew developments and innovation

DAVID RENAULTservice maintenance and procurement

HUMAN RESOURCESANNE ROLLAND

COMMUNICATIONSANNICk MOES

PROJECT MANAGEMENT OFFICEDAVID BLANCHEMANCHE

BUDGET FINANCE ACCOUNTINGNICOLAS DESTREE

OPERATIONSEVA HERSkOVICOVA

euRo1/step1

step2

the mAnAgement

RISk MANAGEMENTANDRé VINkChief Risk Officer

LEGAL & COMPLIANCECAROLINE NEyRINCkgeneral counsel

41 / 42 ebA cleARing Report on Activities 2013 40 / 42 ebA cleARing Report on Activities 2013 country Representatives

countRy RepResentAtives

ANDRé VINkthe netherlands

EVA HERSkOVICOVAczech Republic and slovakia

kATJA HEyDERAustria, germany, spain and switzerland

CHRISTINE ROULINbelgium

DAVID RENAULTfrance

JETTE SIMSONscandinavian countries

ALAN TAyLORireland and united Kingdom

DANIELA VINCIitaly

JANINA GRöNHOLMfinland and baltic countries(as of 2nd January 2014)

photography the photos in this report were taken in the Brussels and Frankfurt offices of EBA CLEARING in April 2014 and provide a snapshot of the day- to-day activities in these offices.

some of the pictures show ebA cleARing board and staff members participating in a meeting of the strategy and policy committee (spc) held on 9th April 2014. the spc is an ebA cleARing board committee that focuses on addressing the longer-term positioning and development of ebA cleARing. the spc is composed of ebA cleARing board members and is currently chaired by ebA cleARing deputy chairman Robert heisterborg (ing bank).

we would like to thank everyone who contributed to this photo project.

© 2014 ebA cleARing All rights reserved

Concept and textebA cleARing 40 rue de courcellesf-75008 paris

Graphic designformfellows Kommunikations-design frankfurt am main

Photographsmichael meinhardbosse und meinhard, bonn

ReproductionsoRt gmbhfrankfurt am main

[email protected]

42 / 42 ebA cleARing Report on Activities 2013 Kapitel

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